Wayne Calloway, former chairman and CEO of PepsiCo once said, “Nothing focuses the mind better than the constant sight of a competitor who wants to wipe you off the map.” Nowhere is this truer than in the video game industry, where Electronic Arts (EA) has made aggressive moves against its competitors during the last few months that border on monopolistic.
Now, it seems every developer and publisher in the business is in danger of a buy-out from the industry giant that puts yearly updates of “Madden NFL” and “Need For Speed” on store shelves.
Just ask Ubisoft.
Ubisoft Entertainment, based in France, is one of the largest video game publishers in the world.
Last month, EA bought 19.9 percent of Ubisoft’s stock without warning, making them the second-largest shareholder in the French company. Only Ubisoft’s owners currently hold more shares.
“Pending further information,” an Ubisoft spokesperson said to Reuters news service, “we consider this operation as hostile. We think this operation is aimed at securing the studios of Ubisoft that are ready to face the next generation of gaming consoles.”
On the other hand, EA’s vice president of communications Jeff Brown said, “We intend to be very good shareholders, not necessarily activists.”
And by “shareholders” he may have meant, “world dictators,” as Ubisoft is not the only case of EA squelching the competition.
Last December, just one week before buying stock in Ubisoft, EA dealt a huge blow to its rivals in the sports game market when it signed a five-year exclusivity contract with the NFL. In other words, only EA can use NFL stadiums, players and other properties in a video game from 2006 until 2011.
This hurts the “ESPN NFL 2K” series of football games developed by Sega and published by Take-Two Interactive, which sold neck-and-neck with EA’s “Madden NFL 2005” last autumn.
To make matters worse for Sega and Take-Two, EA penned a deal with ESPN last week granting exclusive rights to use ESPN’s name, style and other properties in all of the company’s games — for the next 15 years.
In two fell swoops, next year’s “ESPN NFL 2K6” is reduced to “2K6.”
To call EA “aggressive” might be an understatement. Monopolistic is a more accurate word, as the company continues to buy up anything and everything it wants like a kid in a candy store.
Apparently, that candy is too expensive to give all of EA’s employees their paychecks. Two days ago, bosses handed out 60 pink slips at their Los Angeles developer house.
EA L.A.’s general manager Neil Young described the layoffs as, “the first step in transforming the studio for the future,” a future that is undoubtedly less certain for 60 people.
So, what does an observer make of all these moves?
What do they show about EA’s character and what its plans are?
Bluntly, no company in the video game industry is more cutthroat than Electronic Arts.
Licensing deals are extremely common, with any action movie released complemented by a video game. But rarely is licensing used to destroy the competition.
“Madden” is an easily recognizable icon for EA’s football games, as is “Tiger Woods” in its golf simulators. So, why was it necessary to buy the ESPN license, which gives (or rather, gave) credibility to rival Take-Two’s game?
And while “ESPN NFL 2K5” was close competition for “Madden,” it did not threaten to take EA out of the football game business. So, did EA really have to obtain exclusivity rights to the NFL?
Of course not.
Greedy, power hungry, rationalize it however you want — it was unnecessary for EA bigwigs to make the moves they did.
To those that would argue the moves are smart ones, I would agree. If a company has the money to buy a popular brand for themselves, it makes sense to put up the cash for it.
But a smart idea does not make it ethical. In the last month, EA hurt the industry.
With only one NFL game on the market, innovation in the “Madden” series — or, “Madden ESPN” series? — will be almost unnecessary.
Nearly buying out Ubisoft creates an atmosphere of fear and anxiety for every publisher, except perhaps the ones that make consoles.
And laying off five dozen employees increases a growing tolerance for letting go of people, especially when their employer is not in financial trouble.
All may not be lost, however, as EA’s opponents are fighting back.
Earlier this week, Take-Two bought the developer that made Sega Sports titles from Sega, then signed a contract with Major League Baseball. The contract gives exclusive rights to the MLB license to Take-Two and first-party developers, (namely, Sony, Nintendo and Microsoft,) thus fortifying the publisher for a fight in a different arena of sports video gaming.
Meanwhile, the French government pledged its support to Ubisoft to prevent a potential EA takeover. (It is yet to be determined if EA really has more money than the French government itself — it’s possible.)
Despite this, EA still looms in constant sight of the entire video game industry with the potential to change it with a flick of the wrist.
It remains to be seen if competitors will be focused enough to stay “on the map.”
Here’s to hoping.
